Oil prices rose more than $1 on Tuesday on threats of violence in Nigeria's oil region and worries over tight inventories in the United States, the world's biggest energy consumer. The surge came alongside a broad advance across the commodities markets, with gold hitting a record high, and reversed Monday's steep sell-off that had been triggered by worries over a slowing US economy.
US crude settled up $1.24 to $96.33 a barrel, trading inside Monday's range of $94.47 to $98.40. London Brent crude settled at $95.54, up $1.15. Crude futures started the climb early in the day after news that armed groups in Nigeria's oil producing south are building up arms and supplies for a major attack on an oil facility.
"Overnight we kind of chopped around until the story came out about Nigerian militants gearing up for a major attack on oil installations and that seemed to cause the market to take off," said Tom Bentz, an analyst at BNP Paribas Commodity Futures Inc.
Militant attacks in the No 8 oil exporter have already slashed the country's exports 20 percent below capacity. Worries about sliding inventories of oil in the United States, where stockpiles already have plummeted to a three-year low, also boosted prices.
A report from the US government due Wednesday morning is expected to show a decline in crude stocks for the eighth consecutive week, due in part to export disruptions from key supplier Mexico, according to a Reuters poll.
Oil received some further support after an Opec delegate told Reuters the exporter group was unlikely to change oil output policy at its upcoming meeting on February 1 if prices stayed close to their current level. "If the price stays at this level, I don't think they will do anything," the delegate said. "Ministers will be looking at the second quarter when demand declines seasonally." Oil prices remain below the $100 mark hit for the first time last week, weighed down by fears of a recession in the United States. A US report last week showed the nation's unemployment rate rose to 5 percent in December, its highest in more than two years.
"The biggest concern in the market now is the possibility of a recession in the US," said Tony Nunan, a manager at Mitsubishi Corp's risk management unit. "Right now, there seems to be a 50-50 chance that it would happen and even if it doesn't, the fear that it might is enough to spook the market."